THE COLONY — In a sparse field off State Highway 121, work is beginning on what will soon be the largest furniture store in North America.

But the Nebraska Furniture Mart is notable for more than its size. In luring the chain to town, The Colony has promised one of the most generous economic development packages ever offered in North Texas and beyond. Documents show that the city of about 40,000 plans to spend up to $802 million to help build the store and its surrounding developments.

That commitment amounts to more than 15 times the city’s annual budget.

“That is exceptionally big,” said Greg LeRoy, executive director of Good Jobs First, a Washington-based nonprofit that studies and is often critical of economic development deals. “I think it might be a world record.”

City leaders say the development will create jobs and generate much-needed sales tax revenue — more than $600 million over the next 40 years, documents indicate. And, given that the chain is owned by Warren Buffett’s Berkshire Hathaway, there is little concern about the risk.

But in a time when economic development is becoming more and more competitive among cities, the massive price tag raises questions about whether it is the best use of tax dollars.

“It is a very big undertaking, and we understand that, but with the opportunity that it presented to our community, the return was more than acceptable,” said Tod Maurina, assistant city manager for The Colony.

Terms of the deal

The store, which is scheduled to open by the end of 2015, will be along The Colony’s eastern border between Plano Parkway and Spring Creek Parkway. Its showroom and warehouse will be more than 1.8 million square feet — about six times the size of Frisco’s Ikea.

Store officials expect more furniture, electronics and appliances will be sold there each year than at any other store in America. Customers will be attracted by a wide selection and electronic shelf tags that lower prices instantly if a better competing deal is found, they said.

Surrounding the store, the chain plans to build 307 more acres of mixed-use development. No tenants have been announced, but city officials foresee apartments, hotels, retail stores and entertainment venues.

The total development, called Grandscape, will cost about $1.5 billion. In its financing plan, the city predicts that the facility will generate $195 billion in economic activity and create 20,426 jobs over the first 40 years.

“It will see 8 million visitors in the first year it opens,” Maurina said. “That is as many people who go to the Cowboys and Rangers games in Arlington combined.”

The city will spend about $291 million on roads, utilities upgrades and an on-site parking garage, documents show. And it will pay Nebraska Furniture Mart up to $261 million to offset some of the store’s building expenses. The city and the furniture store are also hoping to lure a second “super retail store” to the site and The Colony has promised that it will spend up to $250 million on that facility if they are successful.

In all, the city’s bill could add up to about $20,000 per current resident, though they won’t be expected to fork over the money. Instead, the city will fund the project with a common economic development tool called a Tax Increment Reinvestment Zone, or TIRZ.

The zone designates a specific area of town, in this case the 433-acre Grandscape site, for revitalization. The city then issues debt to upgrade the site, and watches property and sales tax revenue rise. That increased revenue is then directed into a fund used to pay off the debt. Essentially, the sales tax generated by the store funds the store’s construction.

But that method also ties up the increased revenue for decades. In this case, the term of the TIRZ is 40 years, meaning the city will have to wait that long until it can use its windfall for things like police, street maintenance or parks.

In the meantime, Nebraska Furniture Mart has promised to create enough work for 850 full-time jobs, documents show. (The number of employees will actually be around 2,000, but many of them will be part time.) If it fails, it must pay back $5,000 for each job that it doesn’t create.

Mixed opinion

LeRoy, the founder of Good Jobs First, acknowledged that the odds are slim that The Colony will simply lose its money. But, he said, incentives for retail stores, which often pay their workers low wages, are one of the worst possible ways to spend that money.

Stores tend to follow shoppers, he said. In a suburban area with wealthy residents, they would have come on their own.

“Retail will take care of itself,” he said. “Why would you subsidize it and give away your tax base for years?”

In fact, The Colony site was an attractive location even without the incentives because it abuts 1.6 miles of freeway, which is important because the store needs customers who drive from hundreds of miles away to be able to easily access it.

“The incentives were an important factor, but they weren’t the most important factor,” said Jeff Lind, chief strategy and development officer for the chain.

Lind said the company considered eight locations in North Texas. Some cities offered incentives, others didn’t, he said.

Other experts think The Colony is spending its money wisely. Robert Bland, chairman of the Department of Public Administration at the University of North Texas, said the store will help the city diversify its revenue, something it has been hoping to do for years.

The Colony was essentially a neighborhood before it became a city. To this day, it is mostly houses, plus a handful of commercial developments. That means the tax burden falls largely on homeowners, giving it one of the highest property tax rates in the area, Bland said.

The Nebraska Furniture Mart will change that.

“This will mean lower property taxes in the long run,” he said. “I think the city acted very prudently.”

Still, Bland said, there are drawbacks. For one, other stores may now want similar deals before they move to town. And the incentives could punish longtime local businesses, which have paid their full share of taxes and will now be gaining a major competitor, he said.

Either way, the city remains committed and enthusiastic. Maurina, the assistant city manager, said the benefits have already begun to come in. Developer interest and property values in the area are increasing. And Dallas-based Top Golf recent announced plans to open a 61,000-square-foot venue nearby.

That may not have happened without the city’s investment, Maurina said.

“There is a huge benefit to our city if people work here and spend their money close to home,” he said.

At a glance

Founded by Rose Blumkin in 1937.

A majority of the business was sold to Berkshire Hathaway in 1983.

Sells furniture, appliances, computers and televisions online and in stores.

Averages about 2.5 million sales each year, according to the Omaha World-Herald.

Operates two stores, one in Omaha and one in Kansas City. Each store averages about $400 million in annual sales.

The Colony location will be 20 percent bigger than its other stores and sales are projected at $600 million per year.

Ground was broken on The Colony project and the store is scheduled to open by Dec. 31, 2015.

Other notable North Texas economic incentive deals:

The Ballpark in Arlington, 1991: Voters approved spending $135 million in sales taxes to build the home stadium for the Texas Rangers. The city paid off the debt 10 years early.

Cowboys Stadium, Arlington, 2004: Voters approved $325 million in bonds to help pay for the stadium. Sales tax revenue is being used to pay off the debt and payments are ahead of schedule. The city also created a TIRZ in the area in 2006 that called for $115.5 million in road and flood control improvements.

Ikea, Frisco, 2004: The furniture store was reimbursed $1.4 million to open a 310,000-square-foot facility. The store was also promised a 50 percent rebate on all the sales taxes it generates for 10 years. So far, Ikea has received $3.5 million worth of rebates.

Cabela’s, Allen, 2010: The outdoors store was promised $12.2 million to open a 100,000-square-foot store in return for creating 120 full-time jobs.